This Week in Markets in Democracy: Election in India, Kenyan Corruption, End of BRICS

Supporters of Janata Dal (United) celebrate after learning the initial results outside the party office in New Delhi, India, N...sh his standing with foreign leaders amid concern he may not win a second term as prime minister (Reuters/Anindito Mukherjee).

Supporters of Janata Dal (United) celebrate after learning the initial results outside the party office in New Delhi, India, N...sh his standing with foreign leaders amid concern he may not win a second term as prime minister (Reuters/Anindito Mukherjee).

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CFR’sCivil Society, Markets, and Democracy (CSMD) Program highlights noteworthy events and articles each Friday in “This Week in Markets and Democracy.”

Modi’s Electoral Defeat

While polarizing politics helped Turkish President Recep Tayyip Erdogan recapture a parliamentary majority earlier this month, similar tactics by Indian Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP) in the state of Bihar failed. In majority-Hindu Bihar, BJP members stoked religious tensions and violence, leading to a series of Muslim killings. Modi failed to condemn his party’s actions outright. Instead, a coalition of Indian businessmen, intellectuals, foreign investors, and even India’s central bank governor came out against the religious intolerance. So too did voters; the BJP’s alliance lost dozens of seats, reducing their representation to just fifty-eight of the 243 legislators (down from ninety-one previously). While an encouraging step for inclusive democracy, the loss may stymie Modi’s ambitious economic agenda, increasing the opposition vote within the upper house of parliament.

United States Challenges Kenyan Corruption

This week the United States stepped up pressure in the face of Kenya’s growing corruption “crisis.” In July the country’s auditor general found that roughly $16 billion, or a quarter of the national budget, could not be accounted for. A separate watchdog report charged 175 government officials with bribery and abuse of public office. And last week a Kenyan parliament oversight committee uncovered further misuse of funds by various government ministries. The most vivid example: $85 ballpoint pens. United with ten foreign diplomats, the U.S. Ambassador to Kenya released an official statement on Thursday, calling for President Uhuru Kenyatta’s government to investigate and prosecute continued allegations, and threatening international travel restrictions on those responsible. This path invokes a U.S anticorruption tool created in 2004 by the Bush administration—Presidential Proclamation 7750. It enables the United States to ban corrupt individuals and family members from visiting. Several Kenyan officials faced such visa denials in 2009 as part of an aggressive U.S. effort to stem graft. More recently, the Obama administration banned up to ten Hungarian government officials from U.S. travel. Although these actions strained diplomatic relations, 7750 remains one of the most effective ways to target bad behavior.

End of BRIC Era?

This week Goldman Sachs shuttered its BRIC fund, a decade after then Chief Economist Jim O’Neill coined the term, predicting the rise of four large emerging markets: Brazil, Russia, India, and China. Even as slow growth undermined Goldman’s investment thesis, the term gained geopolitical currency. In 2009 the four nations (joined by South Africa in 2011) began an annual summit to discuss and coordinate economic and diplomatic policies, and by 2013 south-south trade reached $5 trillion. During this year’s meeting in Ufa, Russia, the five nations established a New Development Bank and Contingency Reserve Arrangement to finance projects and provide emergency liquidity. Though their economies and political trajectories differ, the nations remain unified in creating alternative institutions for the global south and pushing for more clout within the World Bank and the International Monetary Fund.